Occupy Wall Street 2.0
With Max Keiser and Stacy Herbert
GameStopping Wall Street
"Chancellor on brink of second bailout for banks." — Satoshi Nakamoto
On this episode of Magic Internet Money, host Brad Mills invites fellow podcasters Max Keiser and Stacy Herbert onto the show to discuss how r/WallStreetBets and hedge funds, Citadel and Melvin Capital were involved in Gamestop (GME) stock. The trio discuss how it resembles previous financial crashes and the history of fraud committed by Wall Street bankers. Max passionately defends the right to compete in a free market. The group agrees on one thing; The way to hit Wall Street back is to buy Bitcoin.
Melvin, Citadel, Gamestop, WallStreetBets, What Happened?
Brad and Max waste no time jumping right into the discussion about how r/WallStreetBets (WSB) was crashing the market with no survivors in early February. Reddit user DeepFuckingValue (DFV) revealed plausible evidence that Melvin Capital was naked shorting GME stock. DFV based this evidence on Michael Burry’s analysis of Gamestop, when he figured out that more shares were being sold than actually existed. “Wink wink this is fraud” Brad says after explaining Burry’s analysis that brings us to the current GME situation.
So since Melvin was naked shorting GME and nobody was going to prosecute them for this, the users of WSB decided that since the game is already rigged and stocks can go nowhere but up. They may as well catch their piece of the money while they could. The users at WSB kept buying and buying GME stock just to prevent Melvin from buying it back. Every stock Melvin couldn’t buy back, represented upwards of billions of dollars of debts they’d have to pay back, which they didn’t have. This prompted Citadel, another hedge fund, to bail out Melvin. However Citadel didn’t actually have the money to do this, and they in turn were bailed out by central banks. A tale as old as time.
In order to prevent themselves from losing even more money, Citadel, having ties to the RobinHood trading app, used their ties to the app to prevent even more people from buying and holding GME, essentially slamming the brakes on WSB’s operation against them, but only by rigging markets even more in their favour. But how are the markets rigged? Let’s take a look at how the magic trick is performed.
Integral Markets
The SEC says that in order for a market to have integrity, it should have the following structure over time:25% buys, 25% sells, 25% shorts 25% covers (remember, total short interest does not factor in the market maker's exempt short sells.) For the market in GME to be considered to have "market integrity" the shorts as a percentage of total trading volume should be roughly around 25%. If you can get trade identifier data from the major dark pools & trading venues, you can analyze the trade identifier data to come up with exactly which stocks have more than 25% shorts. When you look at the trade identifier data, you can see that the total amount of short volume, including exempt market maker activity, is 43.59%
The Rigged Game: Seeing the Magic Trick
We recognize your struggle with the rigged game, and we welcome you to Bitcoin. Wall Street funds & market makers are allowing naked shorting on your stock. Once you realize that banks are naked shorting your money, the game changes. For Bitcoiners who don't understand the plight of the WSB folks who are joining the subreddit in droves, allow me to explain. Naked shorting is a fraudulent activity. Shorting is part of healthy price discovery, but when you can't get a locate on the share, it's called naked shorting & it's illegal, a form of stock manipulation. Regulation SHO requires a broker-dealer to have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due before effecting a short sale order in any equity security. This “locate” must be made and documented prior to effecting the short sale.
Total Short Interest of Gamestop was 140%, so WSB identified there was more stock shorted than stock available to be purchased. Meaning a fraudulent market was being made, and they organized together to buy the stock to force a "gamma squeeze" causing the price to rise. The price should have risen to over $1000, but Wall St Insiders came in and shut the party down, rigging the game in favor of the insiders over the average retail investor. Having a TSI over 100% is just one indication that a company is being naked shorted.
Total Short Interest only factors in the non-exempt short sells.With GME, Michael Burry identified in 2019 that GME had a high Total Short Interest (there were more shorts than total shares in the float.) He took a long position and suggested that management do a stock buyback. (read between the lines, squeeze the naked shorts.)That setup allowed for an epic short squeeze when WSB degens eventually piled in, because the shorts would not be able to cover their positions without driving the price of the stock up.Total Short Interest is not the only way to catch naked shorting. The dirty secret is that market makers (like Citadel Securities) can sell stocks short without having a locate, they abuse the market maker exemptions by doing tricks like continuous rollovers, abusing the T+2 settlement rule. How can we tell they are abusing the exemptions, not providing a "bona fide market", but engaging in rehypothecation & making a fraudulent market?
Time Stamps
00:00:19 - Introduction
00:02:21 - Brad introduces the guests for the episode and introduces the topic
00:04:10 - Max Keiser explains what shorting is and what naked shorting is
00:11:20 - Brad, Max, and Stacy elaborate on why Millennials, Generation Z, and young people latched onto the GME short.
00:16:18 - Max and Brad discuss their experience with past financial crises, large and small, and how GME resembles 2008
00:19:45 - Brad explains how Melvin was bailed out by Citadel who was bailed out by the Federal Reserve
00:21:14 - Stacy explains how Citadel and RobinHood are related.
00:24:00 - Brad and Max discuss how fraudulent Wall Street is, and refer to GME as “Occupy Wall Street in Cyberspace”
00:28:48 - Max goes into detail about Virtual Specialist Technology, and how bankers rig markets
00:31:40 - Max and Stacy explain how LIBOR rates and beyond all lead back to London, “the epicenter of fraud”
00:35:18 - Max provides thoughts about what series of “little events” could lead to crashing large funds, and provides historic examples.
00:42:00 - Brad and Max share their knowledge of the fraudulent schemes within the banking system
00:47:55 - Max describes how bankers “killed Greece” and other nations with credit default swaps and the fallout of it
00:50:51 - “Bitcoin is the best way to do battle against crooks” Max explains how Bitcoin is a bet against fraudulent markets
00:53:03 - Stacy and Max share their experience with altcoins and anti-Bitcoiners
00:57:53 - Brad, Max, and Stacy offer their closing remarks after Brad describes GME as the “Attack on the Capital in cyberspace”
Podcast Mentions
How are Melvin, Citadel, and RobinHood Related?
Find Max Keiser
Find Stacy Herbert
Find Brad Mills:
Magic Internet Money Instagram
Choice Quotes
00:18:57 - 00:19:21 “Melvin Capital was the hedge fund that was kind of like a darling hedge fund, and they were naked shorting, just really short against Gamestop. Analysts like Michael Burry and like, Wall Street Bets folks, figured out that Gamestop was being naked shorted most likely because there’s a ton of undisclosed shorting that’s not being covered.”
00:20:23 - 00:20:09 “Citadel takes some of that free money that they got from the Federal Reserve, gives it to Melvin Capital, Wall Street Bets says ‘not enough’ and they buy more, and they evaporate the whole two and a half billion dollars overnight.”
00:20:45 - 00:21:11 “Citadel; It frontruns all flow through RobinHood. So Citadel was one of the people essentially crushing their client, Melvin Capital right? So Citadel gets all RobinHood orders first and then frontruns those orders. So while the Redditors from WallStreetBets were buying on RobinHood it was forcing Citadel’s algorithm to also buy and crush their own company.”